Finding possibilities and possible hazards is equally important when making investments. Here, three stocks carry dangers that should be avoided before June to protect the portfolios. The first is a major participant in the retail industry, and its recent financial performance shows its difficulties. The company’s problems, which include a sharp fall in sales year over year and increasing net losses, point to fundamental problems that may impede its future growth.
The second company’s financial trajectory reveals weaknesses investors should know. Growing financial losses per share and continuing conflicts over governance indicate that the company’s basis is unstable. By recognizing this danger early, investors can protect themselves from future financial downturns.
Finally, despite its reliance on market volatility, the third company — a major participant in the Bitcoin (BTC-USD) market — offers a special possibility. Even though the company’s income has increased significantly during high volatility, it still confronts legal issues that might cause its operations to become unstable. After acknowledging the possible effects of market circumstances and legislative barriers on these companies’ leads, one can act decisively to sell the stocks.
Big Lots (BIG)
Big Lots’ (NYSE:BIG) comparable sales experienced a significant decline of 8.6% in Q4 2023. This indicates the company’s challenges in attracting and maintaining consumer sales, as it struggled to match the previous year’s sales volume. This decline in consolidated top-line is a red flag, signaling a deterioration in the company’s fundamental performance despite its efforts to stimulate growth through strategic moves.
Moreover, the company’s net sales in Q4 reached $1.432 billion, down 7.2% from $1.543 billion in Q4 2022. Despite the advantage of an extra 53rd week, this decline suggests difficulties maintaining or increasing sales volume. Hence, the inability to sustain or raise net sales is a major barrier to quick development.
Further, in Q4, there was a net loss of $30.7 million, or $1.05 per share. This covers significant expenses for project-related costs, impairment charges and distribution facility closures. If these were removed, the adjusted net loss would have remained at $8.3 million, showing ongoing underlying financial difficulties.
The year-long, substantial net losses indicate underlying problems that may hinder future growth if not fully and sustainably resolved.
Trump Media & Technology (DJT)
The net loss per share of Trump Media & Technology (NASDAQ:DJT) indicates a declining trend in financial stability. Redeemable shares had a basic and diluted net loss per share of $0.49 in 2023. Meanwhile, non-redeemable shares saw a $0.99 loss per share. In contrast, in 2022, the net loss per share for redeemable and non-redeemable shares was $0.39 and $0.53. In short, the rising net loss per share over the last two years reflects a worsening financial state. Thus, losses widened by $0.10 and $0.46 per share for redeemable and non-redeemable shares.
Additionally, looking at the Bradford Cohen dispute, Cohen has asserted claims regarding the rights to capitalization. This involves disagreements over the terms and conditions under which capital or shares were raised. Cohen demanded the inspection of Trump Media & Technology’s books and documents, signaling the need for more integrity and possible problems with governance.
Finally, there is Patrick Orlando’s legal dispute about share conversion ratios. The conditions under which some share classes may be changed into others, impacting the company’s control and equity structure, are perhaps at the heart of this disagreement.
Coinbase (COIN)
Coinbase’s (NASDAQ:COIN) top-line is massively influenced by extreme volatility in the crypto ecosystem, as its dependence has fundamental drawbacks. Here, periods of low volatility may result in considerable drops in revenue. However, periods of high volatility can also lead to massive fluctuations in revenue. For instance, sequentially, transaction revenue increased by 103% in Q1 2024 to $1.1 billion. Higher cryptocurrency asset volatility and rising prices, especially in March, were blamed for this spike, boosting revenue by 72% sequentially to $1.6 billion.
Additionally, with $330 billion in customer-safeguarded assets at the end of Q1, the business had 12% of the global cryptocurrency market capitalization. This reflects that Coinbase has significantly entwined operations with the state of the market. Hence, March’s increased volatility in cryptocurrency assets was the primary cause of the substantial spike in transaction income.
Lastly, significant revenue declines might result from a lengthy bear market or a deterioration in market conditions. Significant legal ambiguities surround Coinbase, which might impede its expansion and stability. Therefore, the company is preparing for a rigorous discovery phase that will last the rest of 2024 because of its continuing hustle with the SEC.
On the date of publication, Yiannis Zourmpanos did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.